Banco Santander SA's current ratio of this year was . Banco Santander SA's current ratio of last year was .
==> Last year's current ratio is higher ==> Score 0.

Question 7. Change in Shares in Issue

Compare the number of shares in issue this year, to the number in issue last year.

Score 0 if there is larger number of shares in issue this year, 1 otherwise.

Banco Santander SA's number of shares in issue this year was 13685.4. Banco Santander SA's number of shares in issue last year was 11525.
==> There is larger number of shares in issue this year. ==> Score 0.

Efficiency

Question 8. Change in Gross Margin

Compare this years gross margin (gross profit divided by sales) to last years.

Banco Santander SA's asset turnover of this year was 0.04156994. Banco Santander SA's asset turnover of last year was 0.04061845.
==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score

=

Que. 1

+

Que. 2

+

Que. 3

+

Que. 4

+

Que. 5

+

Que. 6

+

Que. 7

+

Que. 8

+

Que. 9

=

1

+

0

+

1

+

0

+

1

+

0

+

0

+

0

+

1

=

4

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Banco Santander SA has an F-score of 4 indicating the company's financial situation is typical for a stable company.

Explanation

The developer of the system is Joseph D. Piotroski is relatively unknown accounting professor who shuns publicity and rarely gives interviews.

He graduated from the University of Illinois with a B.S. in accounting in 1989, received an M.B.A. from Indiana University in 1994. Five years later, in 1999, after earning a Ph.D. in accounting from the University of Michigan, he became an associate professor of accounting at the University of Chicago.

He wanted to see if he can develop a system (using a simple nine-point scoring system) that can increase the returns of a strategy of investing in low price to book (referred to in the paper as high book to market) value companies.

What he found was something that exceeded his most optimistic expectations.

Buying only those companies that scored highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 led to an average out-performance over the market of 13.4%.

Even more impressive were the results of a strategy of investing in the highest F-Score companies (8 or 9) and shorting companies with the lowest F-Score (0 or 1).

Over the same period from 1976 to 1996 (20 years) this strategy led to an average yearly return of 23%, substantially outperforming the average S&P 500 index return of 15.83% over the same period.

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